Daily Outlook - Portugal Downgraded, Euro Drops

By IBT Staff Reporter On 07/05/11 AT 10:29 PM

U.S. Dollar Trading (US) a mixed day in the markets with positive Asian and European sessions reversed in the US after Portugal was downgraded 4 notches in an aggressive move by Moody's. The losses were modest however with many traders happy to buy to on the dip. Commodities were strong and the Euro weak which left the USD mixed. In US stocks, Looking ahead, June ISM Services forecast at 53.5 vs. 54.6 previously.

The Euro (EUR) more negative ratings news hurt the sentiment but the longs are hard to shake out with the ECB meeting fast approaching with forecast of a rate hike. Crosses took advantage though and EUR/GBP slipped below 0.9000 and EUR/JPY broke Y115. Overall the EUR/USD traded with a low of 1.4395 and a high of 1.4543 before closing the day around 1.4430 inthe New York session. Looking ahead, Q1 GDP forecast unrevised at 0.8% q/q. Also released, May German Industrial Orders forecast at -0.5% vs. 2.8% previously.

The Japanese Yen (JPY) was very contained consolidating above the Y81 level in a 20 pip range. EUR/JPY and AUD/JPY came under pressure with risk off trade in the US session but GBP/JPY enjoyed gains above the Y130 level on strong UK data. Overall the USD/JPY traded with a low of 80.77 and a high of 81.20 before closing the day around 81.05 inthe New York session.

The Sterling (GBP) tested 1.6000 before surging higher on strong June PMI Services at 53.9 vs. 53.5 forecast in a rare better than forecast result. Resistance above 1.6100 proved solid however and the market was content to ease back for the rest of the day. Overall the GBP/USD traded with a low of 1.5989 and a high of 1.6129 before closing the day at 1.6080 in the New York session.

The Australian Dollar (AUD) the RBA meeting was the big news as they held at 4.75% but were more dovish than expected in the accompanying statement citing risk to the growth forecast for next year and concern that employment growth will be slow in the coming months. Support was found at 1.0660 and the market spent the rest of the day in a tight range. Overall the AUD/USD traded with a low of 1.0662 and a high of 1.0743 before closing the day at 1.0690 in the New York session.

Oil & Gold (XAU) Gold rallied with Oil after putting in a base of support under $1500. Overall trading with a low of USD$1493 and high of USD $1517 before ending the New York session at USD$1513 an ounce. Oil popped to $97 with bulls back in control. WTI Oil Closed +$1.95 at $96.89 a barrel.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.4333

1.4427

1.4445

1.4578

1.4653

USD/JPY

80.00

80.29

80.90

81.33

81.63

GBP/USD

1.5822

1.5970

1.6085

1.6200

1.6263

AUD/USD

1.0520

1.0668

1.0705

1.0790

1.0889

XAU/USD

1471.00

1485

1513

1526

1549

OIL/USD

92.50

95.00

97.10

98.00

100.00

Euro - 1.4445

Initial support at 1.4427 (Jun 30 low) followed by 1.4333 (Jun 29 low). Initial resistance is now located at 1.4578 (Jul 4 high) followed by 1.4653 (Jun 9 high)

Yen - 80.90

Initial support is located at 80.29 (Jun 27 low) followed by 80.00 (Key Support). Initial resistance is now at 81.33 (Jun 2 high) followed by 81.63 (76.4% retrace of 82.23-79.7).

Pound - 1.6085

Initial support at 1.5970 (Jun 29 low) followed by 1.5822 (Jan 31 low). Initial resistance is now at 1.6200 (Psych Resistance) followed by 1.6263 (Jun 22 high).

Australian Dollar - 1.0705

Initial support at 1.0668 (Jun 30 low) followed by the 1.0520 (Jun 29 low). Initial resistance is now at 1.0790 (Jul 1 high) followed by 1.0889 (May 11 high).

Gold - 1513

Initial support at 1485 (76.4% retrace of 1462.45-1558.25) followed by 1471 (May 17 low). Initial resistance is now at 1526 (June 24 high) followed by 1523 (Jun 23 high).

Oil - 97.10

Initial support at 95.00 (Intraday Support) followed by 92.50 (Intraday Support). Initial resistance is now at 98.00 (Intraday resistance) followed by 100.00 (Intraday Resistance).